Terraform Labs, headquartered in Singapore, and its founder Do Kwon have reached a preliminary agreement with the U.S. Securities and Exchange Commission (SEC) to settle a civil fraud case. The SEC had filed a lawsuit against them, alleging that they misled investors in the lead-up to the collapse of the stablecoin TerraUSD in 2022.
Details of the settlement were not disclosed, but the agreement was revealed on a court website on Thursday following a jury finding Kwon and Terraform Labs liable for civil fraud charges in April.
The SEC’s allegations revolved around claims that the company and Kwon had misrepresented the stability of TerraUSD to investors in 2021. TerraUSD, a stablecoin intended to maintain a value of $1, suffered a collapse alongside Luna, a more traditional token closely associated with it, causing significant disruptions in cryptocurrency markets in May 2022.
The regulator accused Terraform Labs and Kwon of falsely asserting that Terraform’s blockchain technology was utilized in a popular South Korean mobile payment application.
U.S. District Judge Jed Rakoff in Manhattan has requested the SEC and the defendants to submit supporting documents for the settlement by June 12. However, both an SEC spokesperson and defendants’ attorneys declined to comment on the matter.
